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Pension accounting: ASC 715 discount rate selection

January 8, 2024
clock 2 MIN READ

Disclosures for 2023

Now that 2023 has closed and indices can be updated through year-end, there are changes in long bond yields from December 31, 2022 to December 31, 2023. The figure below shows those changes.

Change in yields, year end 2022 to year end 2023
Bond indexDec. 2022 yieldDec. 2023 yieldChange (BPS)
Bloomberg AA Long Credit5.084.82-26
FTSE Pension Liability Index15.024.83-19
FTSE Pension Liability Index -Intermediate24.994.80-19

What does this mean?

Yields are lower at all durations over one year with the reductions of less than 30 bps. Based on our analysis, plans with a December 31 measurement date should expect slight decreases in their effective PBO discount rate, typically by approximately 20 bps for most plans, except in extreme circumstances where a liability is overwhelmingly weighted to payments in the first year of the payout projection.

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Information provided by SEI Investments Management Corporation (SIMC), a registered investment adviser and wholly owned subsidiary of SEI Investments Company. 

1 Financial Times Stock Exchange (FTSE) Pension Liability Index has a duration as of Dec. 31, 2023 of 17.8 years and the index represents a fully-open plan.

2 Financial Times Stock Exchange (FTSE) Pension Liability Index Intermediate has a duration as of 1Dec. 31, 2023 of of 14.0 years and the index represents a plan that is closed to new entrants.

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